A woman looks at old currency during the opening of the Foreign Debt Museum in Buenos Aires. / AP

by Kim Hjelmgaard, USA TODAY

by Kim Hjelmgaard, USA TODAY

The Central Intelligence Agency's World Factbook says "Argentina benefits from rich natural resources, a highly literate population, an export-oriented agricultural sector, and a diversified industrial base." A hundred years ago, it says, it was one of the world's wealthiest countries.

But that was then and this is now. Or nearly now. In the intervening years, Argentina's economy has surfed a series of booms and busts and in late 2001, the nation defaulted on nearly $100 billion in sovereign debt as its currency collapsed - a record amount for a government.

Outside corporate investors were brought in and a renegotiated plan of payments was put in place that satisfied some but not all creditors. This has led to numerous court battles, with Argentine President Cristina Fernandez saying on Monday that her country is the victim of "extortion" by hedge fund holdouts after the U.S. Supreme Court refused to consider appeals from Argentina over these liabilities, thought to be about $1.33 billion.

But the crisis in Argentina, Latin America's third-largest economy, is not a straightforward one, as Michael Henderson, an emerging markets economist at risk advisory firm Maplecroft, explains:

"The origins of the 2001-02 crisis can be traced back to the country's decision in 1991 to adopt a currency board in which the Argentine peso was fixed at a 1:1 rate with the U.S. dollar. Henderson says that while this "convertibility regime was successful in restoring some economic stability after a period of hyperinflation and volatile growth, it also limited the number of options available to Argentine policymakers to protect against external shocks. According to Henderson, the three major ones were:

An appreciating U.S. dollar, which made the peso less competitive on international markets and weighed on the trade balance. A devaluation by Brazil (one of Argentina's biggest trade partners) in 1998 made matters worse

High external borrowing under President Carlos Menem in the 1990s that led to elevated debt servicing costs

An excessively loose fiscal stance during the "good years." This left policymakers with little space to stimulate the economy when growth began to decelerate in the late 1990s.

More recently, Henderson says Argentina's heavily managed currency exchange rates fed into an acceleration of inflation to over 20% by 2011. A devaluation of the peso against the dollar in January of this year helped relieve some of the strain, but consumer price inflation is still running at about 14% for the first five months of this year.

The devaluation was a "belated recognition that (Argentina's) current economic 'model' was unsustainable," Henderson says. "The country has since been desperately seeking to resolve other structural issues in order to prevent another crisis."

As it stands, Argentina has until June 30 before the next round of payments are due on its discounted bonds. President Fernandez has signaled that the debt will be serviced to stave off a new default, although she is not happy about it.

She said that Monday's ruling "represents a profit of 1,608%, in dollars!" for the holdout bondholders. "I believe that in all of organized crime there has never been a case of a profit of 1,608% in such a short time."